Increasing oil prices and monsoon worries are driving up the peril of higher inflation in India, specialists cautioned—even as the central bank seems poised to trim rates ahead—that is adding up more pressure to increase prices. Prakash Sakpal—Asia Economist at a Dutch bank ING—said to CNBC, “The best situation will be firm low inflation rate that is behind us. Already inflation rate has bottomed and is anticipated to go higher in further time. Food, oil-related fuel, and transport costs are reappearing in play as sources of higher inflation.” The central bank of India—RBI (Reserve Bank of India)—has fixed a long-term inflation aim of 4% and a medium-term aim of amid 2% and 6%.
Indian government data illustrated that in February, India’s CPI (consumer price index) increased to a 4-Month high of 2.57% from 2.05% in January. The core inflation remained at around 5.5% in February. Sakpal further added, “With such a background, I would not be shocked if core inflation speed ups higher than 6% in the further time, the level where it was 6 Months ago.” While core inflation prohibits food prices and volatile fuel, rising energy costs will persist to put pressure on the customer inflation through heavy household use of petrol, diesel and higher transport costs in India, experts say. The oil prices increased to 5-Month highs with no indications of abating.
On a similar note, recently, World Bank stated that India’s economic development is “too much” carried by domestic demand. India’s economic progress in last few years has been quite much driven by household demand and its exports were just one-third of its capacity, a World Bank executive stated, asserting that the next administration needs to concentrate on export-led growth.